Fabio M. Manenti

Platform competition and broadband uptake: Theory and empirical evidence from the European union

Abstract Broadband access provides users with high speed, always-on connectivity to the Internet. Due to its superiority, broadband is seen as the way for consumers and firms to exploit the great potentials of new applications. This has generated a policy debate on how to stimulate adoption of broadband technology. One of the most disputed issues is about competition policies: these may be intended to promote competition in the Digital Subscriber Line (DSL) segment of the market (intra-platform competition), or to stimulate entry into the market for alternative platforms such as cable access or fiber optics (inter-platform competition). Using a model of oligopoly competition between differentiated products, our paper explicitly studies the effects of inter- and intra-platform competition on the diffusion of broadband access. The implications of the model are then tested using data from 14 European countries. The econometric evidence confirms the results of the theoretical model and indicates that while inter-platform competition drives broadband adoption, competition in the market for DSL services does not play a significant role. The results also confirm that lower unbundling prices stimulate broadband uptake.

Dual Licensing in Open Source Software Markets

In this paper we present a theoretical model to study the characteristics and the commercial sustainability of a particular open source (OS) strategy known as dual licensing, the practice of distributing a software both under a commercial and an OS license. We show that the decision to employ a dual licensing strategy occurs whenever the strength and the relevance of the contribution of the OS community are sufficiently large, while it does not depend upon customers’ preferences towards license restrictiveness. The profitability of dual licensing crucially depends on the proper setting of the licensing terms of the OS distribution, which represents the key versioning tool; this analysis suggests a possible explanation for the observed proliferation of open source licenses. J.E.L. codes: L11, L17, L86, D45.

Traffic Management in Wholesale International Roaming: Towards a More Efficient Market?

Despite a general trend of lower charges for mobile calls, in Europe, prices for international roaming calls have remained at levels that are surprisingly high. The apparent reluctance of mobile network operators to lower roaming tariff is generating many antitrust concerns. This paper presents in a two-country two-firm framework the functioning of the current system governing wholesale international roaming agreements based on interoperator tariffs. The focus is on the role of traffic management; thanks to the emergence of traffic direction techniques, mobile network operators are allowed to select the roaming partner. We show that, unless these techniques do not allow for perfect control on traffic flows, traffic management does not improve the markets efficiency. In line with the regulatory mechanism recently adopted by the European Commission, we show that a simple price cap mechanism may restore partial efficiency in the wholesale market. We also show that although cross-border cooperation at the wholesale level is Pareto efficient, it will not emerge as an equilibrium of a two-sided matching game.

On the Assessment of Regulators' Efficiency: An Application to European Telecommunications

This paper offers a methodology to assess the internal productive efficiency of National Regulatory Authorities (NRAs) based on the performances of regulated markets, measured in terms of the degree of market efficiency (either static or dynamic). The estimation procedure is based on a Data Envelopment Analysis (DEA), along with a smoothed bootstrap method and it is applied to telecommunications sector across 18 European countries, 5 of which are new accession countries, in 2005. After the discussion of several desirable outcomes for a telecom regulator, we construct an ad hoc database containing information about NRAs regulatory inputs and outputs. We run three bootstrapped DEAs in order to rank NRAs according to their efficiency in carrying out their regulatory activities. We find the NRAs in 2004 accession countries are more efficient in pursuing dynamic efficiency goals than the more experienced NRAs, while they perform generally worse when the regulatory outcomes are measured in terms of retail efficiency.

Updates Management in Mobile Applications. iTunes vs Google Play

This paper focuses on a specific strategy that developers of mobile applications may use to stimulate demand: the release of updates. We start with a stylised theoretical analysis to describe the developers decision to release an update. Its predictions are then tested by using an unbalanced panel with the top 1,000 apps in iTunes and Google Play for five European countries. We show that while in iTunes updates increase the rate of growth of downloads, in Google Play their effect is not significant. We argue that the lack of quality control by Google Play can lead to an excess of updating. We also find that the past performance of the app influences the decision to release an update, but only in iTunes. This finding is in line with our theoretical analysis and can again be interpreted on the basis of the different way of governing the release of updates in the two stores.

Ex-ante licensing in sequential innovations

The theoretical literature on the cumulative innovation process has emphasized the role of ex-ante licensing – namely, licensing agreements negotiated before the follow-on innovator has sunk its R&D investment – in mitigating the risk of hold-up of future innovations. In this paper, we consider a patent-holder and a follow-on innovator bargaining over the licensing terms in a context where the former firm is unable to observe the timing of the R&D investment of the latter. We show that the possibilities of restoring the R&D incentives by setting the licensing terms appropriately are severely limited.

Intellectual Property and Innovation in Information and Communication Technology (ICT)

The aim of this study is to provide a structured review of the role of IPR in fostering innovation and economic growth in the European ICT sector. Typically IPR analysis of industries focuses on patents. In practice, however, IPR strategies are developed combining the use of different IP rights. The scope of analysis considers this and looks at the joint use of patents, trademarks and industrial designs, each protecting a different type of knowledge-based asset. Based on these characteristics, the focus of the research is to provide an overview of the mechanisms typically employed in order to appropriate the returns from R&D investments. For each formal IPR, we briefly review the main contributions to the economic literature, both theoretical and empirical, on the rationale for its existence and the effects it generates on firms’ behaviour and market outcomes. We then highlight the most important emerging issues. In the final section of the study, we focus on the software industry.

THE ROLE OF PATENTS IN INFORMATION AND COMMUNICATION TECHNOLOGIES: A SURVEY OF THE LITERATURE: PATENTS IN INFORMATION AND COMMUNICATION TECHNOLOGIES

During the last decades, the number of ICT related patents has increased considerably. In association with a great fragmentation in IP rights, the increasing number of patents has generated a series of potentially problematic consequences. Patent thickets, royalty stacking, the emergence of patent assertion entities, increased patent litigation – in particular around standard essential patents – and the difficulties in the definition of fair, reasonable and non-discriminatory (FRAND) licensing terms are among the most debated issues in the literature that we review in this paper. We devote a specific section of our survey to patents involving software products, where the above problems are amplified by the high level of abstraction of computer algorithms. In our analysis we mix theoretical and empirical arguments with a more policy-oriented reasoning. This allows us to better position the different issues in the relevant political and economic context.

To upgrade or not to upgrade? the release of new versions to survive in the hypercompetitive app market

Very low entry barriers and an exceptionally high degree of competition characterize the market for mobile applications. In such an environment one of the critical issues is how to at- tract the attention of users. Practitioners and developers are well aware that managing app updates (i.e., releasing new versions of an existing app) is critical to increase app visibil- ity and to keep users engaged, disguising a hidden strategy to stimulate downloads. We use unbalanced panel data with characteristics for the top 1,000 apps on iTunes and Google Play stores, for five European countries, to empirically in- vestigate publishers’ strategies concerning the release of up- dates. We find that only in the case of iTunes updates boost downloads and are more likely to be released when the app is experiencing poor performance. We interpret this finding as evidence that the lack of quality control by Google Play leads to an excess of updating of Android apps.

Bottleneck Access with Structural Regulation and Endogenous Competition

In a simple model of network industry, where an upstream monopolist provides an essential input for downstream service supply, we analyze the competitive settings arising in the downstream market under alternative regulatory frameworks; we combine structural (i.e. vertical integration, functional/ownership separation) and conduct (discriminatory and nondiscriminatory access) regulatory remedies. Downstream firms are characterized by different levels of cost efficiency in the provision of the service. We show that the degree of heterogeneity in firmsO cost efficiency is critical to the determination of the amount of competition that emerges in the downstream market, and of the efficiency of the industry. We show that i) when downstream firms are significantly heterogenous, discriminatory access fees may be socially desirable and ii) vertical integration is always socially preferable.